A Weighted Average Anti-Dilution is an anti-dilution mechanism that adjusts the conversion price of preferred stock in a down round based on a formula that considers both the lower issuance price and the number of shares issued, resulting in a more moderate adjustment than full ratchet. In VC term sheets, Weighted Average Anti-Dilution can be broad-based or narrow-based, and Weighted Average Anti-Dilution is a key lever for balancing investor protection with founder dilution.
